L44-L45-Meaning of winding up,

winding up by the court- its grounds

and petition
 Learning Outcomes
• Cognize about procedure of dissolving the
company
 Meaning
• When the company, formed and registered
under the CA2013 , has been ordered to
be wind up by the Court or Tribunal the
same is known as compulsory winding up
of a company.
Reasons when registrar can file petition

 (a) If the company has made a default in filing with the Registrar its
financial statements or annual returns for immediately preceding five
consecutive financial years; 

     (b) If the company has acted against the interests of the sovereignty
and integrity of India the security of the State friendly relations with
foreign States, public order, decency or morality; 

     (c) If the affairs of the company have been conducted in a fraudulent

manner or the company was formed for fraudulent and unlawful purpose
or the persons concerned in the formation or management of its
affairs have been guilty of fraud, misfeasance or misconduct in
connection therewith and that it is proper that the company be wound up
 Circumstances Under which a Company
may be Wind Up by the Tribunal
• When the company has passed the special resolution effecting that the
company be wound up by the Court or Tribunal.  
• Has acted against the interest of the sovereignty and integrity of the country.
• The company has defaulted in filing its financial statement or annual returns
for five consecutive financial years. 
• Tribunal or Court believes that the company is conducting its affairs
fraudulently or the formation of the company was for a fraudulent/unlawful
purpose. 
• The Tribunal or Court is of the opinion that it is just and equitable to wind up
the company.
Just and Equitable Grounds
• When the object of the company was fraudulent,
• When substratum of the company has disappeared i.e original object
become impossible to attain;
• The object for which the company is formed is illegal or becomes illegal by
change in law;
• The object for which company was incorporated has been completed;
• Deadlock in management due to differences among rival group and
disagreement cannot be resolved in general or board meeting;
• Public interest
 Who can file Petition
An application for closure of company shall be made by
way of petition, and only the following listed persons are
allowed to file such petition:
– The company
– The creditors
– Any contributory or contributors
– The registrar
– Any person authorized by the Central Government
– Any person authorized by the State Government
Procedure of winding up
 Step 1
• The first step is the filing of a petition for
winding up of a company, and as already
mentioned above, the petition can be filed
by only selected categories of person. 
 Step 2
• The petition, so filed, has to be
accompanied by the Statement of Affairs
of the Company.
 Step 3
• The petition should be advertised in the
following manner;
• The advertisement should be in a daily
newspaper
• The language of the advertisement should
be in the regional language of the
respective area and in English.
 Step 3
• The company needs to submit complete
audited books of accounts once all the
claims of the company are satisfied . If the
Tribunal finds that the accounts are in
order and all the mandatory compliance
has been complied with by the company,
the Tribunal will pass an order for
dissolving/winding up the company. 
 Step 4
• The registrar will issue a notice, after the
order of the tribunal, to the official gazette
mentioning that the company is
dissolved.  
 WHO CAN BE APPOINTED AS OFFICIAL LIQUIDATOR?

The provisional liquidator or the Company Liquidator, as

the case may, shall be appointed by the Tribunal from
amongst the insolvency professionals registered under
the Insolvency and Bankruptcy Code, 2016;
 Duties of company Liquidator
• To submit Report
• To take over the custody of company’s property
• To have regard to the directions of creditors or contributories
• To summon meetings of creditors or contributories
• To keep proper books- in prescribed manner
• To submit accounts- to tribunal at least twice in each year
during his tenure
• To appoint an advisory committee-on the direction of tribunal
after calling the meeting of creditors and contributories
• To submit the information as to pending liquidation - (file in the
tribunal a statement certified by auditor, where winding up
procedure is not concluded in one year)
 Think on this
A private company has only two shareholders
who are also the directors with equal rights of
management and voting power. The
company has made large profits, but there is
a complete deadlock in the management of
the company. One of the shareholders
applied for the winding up of the company.
- Discuss the result of the petition.
- Will Tribunal pass a winding up order?
 Ans
The petition will be approved by the
Tribunal.
The company would be ordered to wind
up as it is just and equitable to close the
business due to deadlock in the
management.
 Think on this
A company was registered to carry textile
business. The MD had a prepondering voting
power in the company. The directors omitted to
hold meetings, submit accounts, or recommend
dividends and they had laid themselves open to
the suspicion that their object in so omitting was to
keep the shareholders in ignorance of the
company’s position and to acquire the shares at
an undervalue.
An application for the winding up is filed.
• Will Tribunal pass a winding up order?
 Ans

The Tribunal will pass a winding up order

as it is just and equitable to close the
business. The exact reason can be that
the management is carried on in such a
way that the minority is
disregarded/oppressed.
One of the following is the instance where the
just and equitable clause for winding up can be
adopted by the Tribunal.
a)Oppression of minority by the majority.
b)Inability to pay debts.
c)Commercial insolvency.
d)Reduction of members below minimum.
• A
Compulsory winding up:
a)If a company unable to pay its debt
b)If the number of members of company reduced
below statutory limit.
c)If a company does commence its business within
a year from its incorporation.
d)All of the above.
• d
A contibutory is
a) A creditor
b) A shareholder
c) A debenture holder
d) A Director
• b